Climate change

Power to the people: pro-poor electricity provision

Can access to electricity from renewable sources play a role in poverty reduction?

The Night Lights of Planet Earth. WoodleyWonderWorks, CC BY 2.0
Edited by Alan Stanley
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Energy poverty is a major development issue with nearly 1.3 billion people, close to one-fifth of the world’s population, have no access to electricity. After intense activity during the 1970s, electrification slipped down the list of development priorities, largely due to the disappointing results of many programmes and it took until the late 1990s for this to begin to change. This, to some extent coincided with increasing global action recognising the need to reduce carbon emissions from existing energy systems to address climate change. To make progress on both objectives therefore suggested the need for a sharp increase in renewable electricity production, both on and off-grid.

Today, electrification is again seen as central to poverty reduction efforts and where production comes from renewable sources, it can also make a positive contribution to low-carbon development strategies – on the face of it a classic ‘win-win’ situation. Certainly electricity access can have significant impacts on poverty and welfare, but not automatically. Once electricity is generated, it needs to be reliably fed into the system and be made accessible, and affordable, for the poor. This increased provision then needs to translate into increased consumption and this in turn needs to translate into poverty reduction and economic growth. 

Continue reading: The generation game

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Stephen Spratt 

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The generation game

A causal chain describing how to achieve electricity provision that is both pro-poor and low carbon might look something like this.

electricity diagram bigger.jpg

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

Casual chain of poverty impacts of electricity generation capacity. Source: Ana Pueyo et al, 2013

For on-grid systems it is not enough to simply build and maintain adequate generation and distribution capacity. There are crucial decisions to be made on which communities to electrify. In this regard, public utilities have traditionally concentrated their services on urban elites. Because of concerns over cost recovery, donors have also favoured densely populated communities, with relatively high average household income, located close to existing grids. Although these issues may partly explain the low impacts of earlier electrification projects on poverty, different approaches are possible. For example, around 17 per cent of World Bank funded projects use a social allocation rule, which prioritises deprived areas regardless of economic criteria.

But even if electricity is available, poor households need to be able to afford connection costs and buy and use sufficient electricity to alleviate their poverty. These were big issues in the 1980s and remain a problem with rural electrification projects today. Once connected, usage depends on ownership of appliances as diverse as lights, mobile phones, televisions, radios, fridges, water pumps, sewing machines or machinery. Because of the costs involved, however, most poor households use electricity only for lighting, severely limiting potential benefits. As incomes rise, more diverse uses are introduced (e.g. mobile charging, television and radio use) but the use of electricity for productive activities (e.g. in agriculture, industrial or service sectors) remains rare. As a result, the income generating effect of electricity remains low, which in turn contributes to poor people’s inability to afford electricity.

Continue reading: Power to the people

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Power to the people

If these issues around access are acknowledged and dealt with appropriately there is some evidence that increasing the supply of electricity is more likely to reduce poverty and improve the quality of poor people’s lives.

Electricity consumption can affect poverty in many ways. Direct benefits can include raising incomes by liberating time for paid employment, enabling innovation and the creation of new enterprises. More indirect benefits at the household level include improved education and health as, for example,  improve as lighting enables studying at home and the use of electrical appliances improves food storage and reduces indoor air pollution.

Positive gender impacts can result from better access to information and less time spent on non-paid work and increased entertainment and information via television, radio and mobile phones are also likely to improve opportunities and quality of life.

Outside the home, electricity facilitates sterilization, water purification and supply, sanitation, and the refrigeration of essential medicines whilst  access to electricity may also increase the willingness of educated workers (e.g. teachers and doctors) to live in rural areas.

However measuring these indirect impacts has proved extremely challenging. They  tend to be difficult to quantify and can be distorted by external factors such as the tendency to increase access to areas that already have relatively good prospects. Many effects can only be seen after long periods, but as time passes they become more difficult to attribute to changes in electricity access. Impact studies need to be very carefully designed to avoid these problems to ensure that programmes are designed to maximise poverty impacts.

At a more macro level increased electricity supply can contribute more broadly to economic growth by, for example, reducing production costs, enabling innovation, increasing investment and improving agricultural and industrial productivity.

But although the channels are well understood, evidence on the causal link from increased electricity consumption to economic growth remains inconclusive. Greater electricity consumption can contribute to growth, but growth also increases demand for electricity. An important question, when considering whether to prioritise electrification is the effectiveness of this approach in comparison to other measures to boost growth. On this question, electricity supply, access and reliability should be prioritised if it is a key binding constraint on growth.

Continue reading: Back to introduction

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